Yuan shift delayed: Zhu

09:17, May 21, 2010      

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Chinese Assistant Finance Minister Zhu Guangyao urged major reserve-currency nations to keep their exchange rates stable and said China will press ahead steadfastly with reforming the yuan exchange rate system, but external pressure will slow the process.

The eurozone debt crisis poses a great challenge to stabilization of the world financial market and the global economic recovery process, Zhu told a press conference Thursday before next week's strategic and economic dialogue with the US, asking for joint efforts to take on the challenge.

"The eurozone debt crisis reflects the systemic risks that still exist in the world economic system. Major reserve-currency-issuing countries should maintain the stability of exchange rates to create a favorable environment for world economic recovery," Zhu said.

Zhu also said the direction and principles of the country's yuan exchange rate scheme reform remain unchanged, but detailed measures will be based on the world economic situation and China's own economic performance.

"We will not give way to outside pressure while promoting the process," Zhu said.

The policy has kept the yuan's value basically unchanged against the dollar since July 2008.

China's central bank governor Zhou Xiaochuan said in March China will at some point exit the special exchange rate mechanism, adding it is a temporary response to the global financial crisis.

President Hu Jintao told US President Barack Obama at April's Nuclear Security Summit in Washington that yuan appreciation would neither balance Sino-US trade nor solve the US unemployment problem.

Hong Kong-based analyst Qu Hongbin from HSBC said China is feeling uneasy about the sharp fall of the euro, and fears the eurozone debt crisis might evolve into a larger scale crisis and could impact China's exports to Europe.

"But that doesn't necessarily mean that China will definitely delay the reform. The timing should depend mostly on China's economic situation," Qu told the Global Times. Qu believes the right time has come, based on many economic indicators including exports and employment.

Zhao Xijun, deputy dean of the School of Finance at Renmin University of China, disagreed.

The instability of the yuan and the dollar will add to uncertainties of the present world economy and reform should be carried out after the situation in Europe turns better, Zhao said.

Source: Global Times


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